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Campbell on Key’s sell out

Written By: - Date published: 3:39 pm, October 28th, 2010 - 21 comments
Categories: business, film, john key, Media - Tags: , ,

During the whole sorry Hobbit saga two commentators stood out well clear of the pack for the depth of their coverage and the accuracy of their insight. Those commentators were our own Irish Bill, and Scoop’s Gordon Campbell. As the dust settles today Campbell has written a long piece on the settlement and its implications. The whole thing is well worth a read, but here are some key points:

At the very least, that’s an extra $US25 million sweetener for Warners. Our employment laws for film industry workers will also be changed. It means that John Key has done what he said two days ago New Zealand couldn’t afford to do – match the 20% subsidies being offered by countries like France and Hungary, Earlier this week, Key said we could offer Warners some more money, but couldn’t match the offers being made by other countries:

Mr Key said Warner executives had raised the disparity in tax rebates in different countries; New Zealand’s rebate is 15 per cent on domestic spending, less than countries such as France and Hungary (20 per cent) and Ireland (up to 28 per cent).

“That is large and we can’t match that,” Mr Key said. “What I can’t rule out is [that] we won’t look at some things at the margins that might make the deal slightly better.”

Yet matching the bids by some of those countries is exactly what he’s done. At 15% the basic subsidy on the $US500 million budget for The Hobbit stands theoretically at least, to be $US75 million. Add in that extra $US25 million and you get a total of $US100 million – which is the headline rate you’d get from the 20% subsidy on offer in France or Hungary. Except in addition, we’re also offering (a) to change our employment law and (b) to offer greater flexibility about the qualifying criteria for the LBSPGS – though the detail of those criteria changes can’t be revealed for ‘reasons of commercial sensitivity’ lest others, presumably, press for similar treatment.

Key said that we couldn’t match the tax deals offered by other countries, but according to Campbell’s calculations that’s exactly what we have done. Campbell also has harsh words to say about Key’s “skill” as a negotiator:

For an allegedly hard-nosed former merchant banker, Key also seems to have been remarkably inept as a negotiator – having given away his intentions (yes, we’ll change the employment law, yes, we’ll give you more money) even before he entered the bargaining room. There seems to have been no attempt to call Warners’ bluff and use the one factor – time – where we actually had Warners over a barrel. …

It was always going to be hard enough meeting the tight schedule in optimal conditions out of Miramar, let alone adding foreign locations, foreign crews, and foreign trade unions into the mix. In these circumstances we had no reason to cave into Warners – and getting an ad about New Zealand as a location onto the eventual DVD is a laughable trade-off. Key’s basic negotiating stance seems to have been: I’m willing to jump, but don’t ask me to jump too high, please. What a tiger.

Leaving aside the sale of our sovereignty, even the poor agreement reached by Key is good news in purely economic terms:

In the end.. even this crappy deal was still value for money, I’d argue. Key does appear to have bargained like a two-week old kitten, but the stakes involved will still mean we come out ahead.

Campbell goes on to make a compelling case for using this opportunity to strengthen the film industry in NZ much more broadly and robustly than we did after LOTR. We need to move away from reliance on occasional (and temperamental) “superstars” like Peter Jackson, and towards a broader based industry that is more genuinely committed to New Zealand and its workers.

For Campbell’s full, detailed, and thoughtful take on all this, go read his original article here.

21 comments on “Campbell on Key’s sell out”

  1. Draco T Bastard 1

    We need to move away from reliance on occasional (and temperamental) “superstars” like Peter Jackson, and towards a broader based industry that is more genuinely committed to New Zealand and its workers.

    If we’re going to do that then we’re talking about doing the whole lot “inhouse” as it were which would mean full government funding rather than hoping for a large foreign conglomerate to come over and shaft us again. I think this would be the best option as it develops local talent far more than kissing arse to the likes of Warner Bros.

  2. SHG 2

    We need to move away from reliance on occasional (and temperamental) “superstars” like Peter Jackson, and towards a broader based industry that is more genuinely committed to New Zealand and its workers

    What is a “broader based industry”?

    • Bright Red 2.1

      essentially, the film industry is a monopoly, right? Remember when you were wetting yourself because the film industry would collapse if weta didn’t get this one film? the film industry is weta – that means it’s a monopoly, and any monopoly can exercise its market power to win super-profits, in theis case by holding a gun to the head of the government.

      a broad based industry doesn’t have private monopolies.

      • SHG 2.1.1

        Saying you want “a broader based industry” is useless. It’s like saying “I want equality!” It means nothing without explanation.

        • r0b 2.1.1.1

          It’s pretty clearly explained in Campbell’s article SHG. Let me take a wild guess – you didn’t bother to read it.

          • lprent 2.1.1.1.1

            I think that you were right. By the looks of his comments over the last few days the shagger only reiterates what his navel fluff tells him is important. I think he is locked into the 2007 troll mode – repeat your line over and over again. Ignore what anyone else says. Never actually debate with anyone els because it might show up your ignorance.

            But he hasn’t tripped my troll moderator yet. He is just rather boring. As soon as you see his handle on a comment you can predict what he is going to say…

        • bbfloyd 2.1.1.2

          SHG.. neither does wasting our time with playing dumb just so that you can satisfy whatever strange compulsions you are afflicted with… in fact, your arguments mean less than nothing…

    • Carol 2.2

      I think Campbell points in the direction of using Weta’s technological expertise in areas of gaming.

      But I also think, for the industry to be viable in NZ, it needs on-going projects for all film workers. TV productions tend to have a longer life than movies, and the discussion has tended to focus on Jackson and Weta, and ignored Auckland’s history of productions. This includes international TV productions like Hercules and Xena, and other ones since, like Power Rangers, Legend of the Seeker and Spartacus. This has led to the development of various studios and facilities around Auckland, including the current Henderson Studios that is leased out for local and international work regularly.

      I don’t think we should aim to become very dependent on Hollywood corporates. Having some surety of work, enables the skill base and resources to be maintained. Some of our local productions for film and TV have contributed to this: first Shortlland Street and later Outrageous Fortune.

      There is a lot to be gained by sharing skills, expertise, and resources with a range of other countries, to add some support to the NZ base, and this can be done in a way to give Kiwis more control than with many of the US corporates: eg as I understand it, there can be a range of agreements from 20%-80% to 50-50% in terms of inputs & outcomes.
      NZ also has done a range of co-productions, and has been developing a range of international bi-lateral agreements: I saw online there was a co-production agreement with France written back in 87.

      Key signed a co-production agreement with China back in July:

      http://www.beehive.govt.nz/release/film+co-production+agreement+signed+china

      There has been work done during the last 3 years on developing connections with South Korea. South Korea have thriving movie, TV and IT industries – they are a rising centre of innovation in the area:

      http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10681057

      5:30 AM Sunday Oct 17, 2010
      The Auckland film industry hopes its three-year effort to build relations with South Korea will lead to a lucrative new co-production market.

      Industry body Film Auckland has signed a memorandum of understanding with its equivalent body in the city of Pusan.

      The agreement was signed this week at the annual Pusan International Film Festival, one of the largest film festivals in Asia.

      The link-up with Pusan is part of work Film Auckland has been doing since 2007 to create opportunities for joint New Zealand/Korean productions.

      The South Korean and New Zealand governments signed a co-production treaty in 2008 and, since then, there had been numerous exchanges of film industry delegations between the two countries, said Film Auckland executive manager Michael Brook.

      “The groundwork’s definitely set,” Brook said.

      While there hadn’t been any co-productions yet, various projects were in development, he said.

      The Auckland film industry had some great North American clients but “to get some really good growth we need new markets”.

      ….
      Next year, for the first time, Auckland will host the annual Asia-Pacific Producers Network, a gathering aimed at developing co-productions.

      This article also says that under the co-production agreement with China, that would enable China-NZ co-productions to be shown in China. China strongly restricts the number of foreign films shown in China.

      • clandestino 2.2.1

        The only way we are going to get a ‘broader based’ film industry is if we, the consumers, start paying for stuff. We don’t, we won’t, and we never will, so it’s a non starter. Ever wondered why Sky (Prime) often makes good NZ docos etc, while the rest wallow in filthy foreign seconds?

        • Colonial Viper 2.2.1.1

          if we, the consumers, start paying for stuff. We don’t, we won’t, and we never will,

          What clandestino, are you suddenly spokesperson for all global consumers now? Or are you just speaking BS?

          • clandestino 2.2.1.1.1

            No, I’m just saying if the demand was there it’d get made. I honestly hope we make some NZ stories coz we’ve got plenty but it seems obvious no one’s fronting up with the capital perhaps because it won’t make even as many don’t want to pay.

            • Colonial Viper 2.2.1.1.1.1

              This is the old problem of people continually diverting billions of capital into tax sheltered property speculation and property development. Keeps a few builders occupied but no new industries get built.

  3. ghostwhowalksnz 3

    The reason why France could offer 20% rebate is that matches the GST ( VAT) rate
    Likewise Hungary has a GST rate of 25%.
    Ireland has a 21% rate.

    The rebates are essentially to return the GST back to the company. This matches what would happen if an ordinary product was sold overseas.
    For a film the the negative is ‘made elsewhere’ and is the final product .

    • Lanthanide 3.1

      Is there something different to way the GST is handled in the film industry in NZ?

      I mean, isn’t it only the end-user that pays GST. Company A digs up some iron and sells it to company B at $10 + $1.50 GST. Company B claims a refund from the government of $1.50, does some processing and sells the iron to Company C for $20 + $3 GST. Company C claims $3 from the government as a GST refund and sell the final product to Consumer Z for $30 + $4.50 GST. The way it boils down is only the final consumer Z has paid GST, because company B and C claimed refunds from the government.

      How are movie studios paying GST in NZ?

      • ghostwhowalksnz 3.1.1

        Contractors !!!

        When you are a contactor you invoice for your services . Which includes GST

        This would also include equipment hire , making sets, location rentals …. the whole gamut.

        • Colonial Viper 3.1.1.1

          There is no way that the film companies end up paying GST here in NZ anyway. They get all their GST refunded with every GST tax return. Only end consumers end up paying GST.

        • Lanthanide 3.1.1.2

          The contractor collects the GST and returns it to the government.

          Meanwhile, the film company files a GST return to the government saying “we paid xx GST while running our business” and the government refunds it back to them.

          This is no different than Company B to Company C in my example above, except instead of products made from iron, we’re dealing with creative services from a contractor. It’s treated exactly the same for tax purposes – the S part of GST is “services”.

          The GST system as it is implemented is a big paperwork merry-go-round. It’d be nice if business to business transactions could simply waive GST and be done with it, but that system would be wide open for exploiting, and when some company buys something they may not end up recouping GST in the end at all, so waiving the GST on the first transaction may not be the correct thing to do.

          • ghostwhowalksnz 3.1.1.2.1

            No No No.
            First its they arent paying GST now they get a refund . get your story right

            A GST Refund ? No way.
            A film is not like a shipment of bicycles made in NZ. The final product is a film negative, worth perhaps $5000 to produce, and even that is probably the old fashioned way and more likely just a hard disk worth $200. It s only once people see it in cinemas or rent DVDs that there is income .
            Many is the time a $200 mill production gets $20 mill at the box office .
            That is where the ‘income’ is made. And its scattered around the world and over time. Cant claim that back on NZ GST.

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